Property Valuation
A Delaware commercial property has a net operating income (NOI) of $90,000 and is purchased for $1,125,000. What is the capitalization rate?
A6%
B7%
C8%✓ Correct
D9%
Explanation
Cap rate = NOI ÷ Purchase Price = $90,000 ÷ $1,125,000 = 0.08 = 8%. The capitalization rate represents the expected return on investment without financing, and is used to estimate the value of income-producing properties.
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